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Crowdsourcing: A Definition

I like to use two definitions for crowdsourcing:

The White Paper Version: Crowdsourcing is the act of taking a job traditionally performed by a designated agent (usually an employee) and outsourcing it to an undefined, generally large group of people in the form of an open call.

The Soundbyte Version: The application of Open Source principles to fields outside of software.

The Rise of Crowdsourcing

Read the original article about crowdsourcing, published in the June, 2006 issue of Wired Magazine.

December 03, 2008

Crowdsourcing: Now With a Real Business Model!

Venture capital is drying up, with less money flowing in fewer deals, but at least one company managed to score a tidy sum. On Tuesday uTest -- which crowdsources software testing -- announced it had secured $5 million in Series B financing.

What makes the news remarkable is that uTest is a crowdsourcing company. Hype notwithstanding, crowdsourcing hasn't yielded more than a few viable businesses in the last few years. We know crowdsourcing exists because we've seen it flourish in the wild, which is to say, a few entrepreneurs have stumbled into very profitable businesses by building vibrant communities first, and monetizing them later.

Breeding crowdsourcing in captivity -- creating instant communities for the purpose of making a quick buch -- has proven far more difficult.

Simplicity helps, as does the appeal of raw competition: The company
allows its clients to post software to its community of testers, who
then go about racing through the program looking for bugs. The spoils
go to whoever spots a bug first.

And according to sources inside the company, it's already
established an enviable track record. It stealth-launched back in
February, and all ten of the pilot participants have been converted
into paying clients. Its official launch came on August 19. uTest says
revenues grew 150 percent over the last three months, and itscommunity now includes nearly 12,000 testers from 144 countries.

This unique approach to quality assurance -- uTest calls it "pay for
performance" -- promises to reduce the often onerous cost of that painful process. According to research firm Gartner,
software testing is a $13 billion business, and bugs cost US companies
some $60 billion. So is it safe to say crowdsourcing is viable? That's
probably as premature as when TechCrunch declared crowdsourcing dead in the water after Cambrian House, one of the first to chart these waters, cried uncle and changed its business model.

But I think it is safe to draw a few conclusions from uTest's success:

Coders Make a Great Crowd: Because crowdsourcing is built from
the open source template, any company looking to leverage computer
professionals has the advantage of an audience already familiar with
the basic idea of community production. It's no accident that another
crowdsourcing success story, TopCoder, has a similar business plan to uTest, though they build software as well as test it.

The Downturn Will Be a Boon to Crowdsourcing: A lot of crowdsourcing models offer cost savings. This promise has often turned out to be illusory, sometimes in comic proportions.
But in an era of mass layoffs and draconian cost-cutting, the prospect
of dramatically reducing overhead will be too tantalizing to resist.
Companies that can actually deliver, as it seems uTest can, will reap
the benefits.

Crowdsourcing is a Global Phenomenon: Most of the crowdsourcing companies I profiled in my book
boast very cosmopolitan user bases, which is to say, less than half of
their community members resided inside the United States. One of the
comments on the TechCrunch post about uTest Tuesday was telling: "It was just too hard to compete with countries
like India who organize groups to test the available products. This
means that you as an individual have to be super quick to find the bugs
before they do. It is just too stressful compared to the reward."

Comments

Jeff,

Tks for this article, I am reading your book (again)...that should tell you that I am deep into the topic of crowdsourcing and I believe strongly in the future of mass collaboration. The downturn will definitely make people consider the low cost benefits of sourcing quality work from the global community.

If you get a chance, go over & check out www.hugocreate.com as well...this is another fun, small (but extremely global) fragrance crowdsourcing project.

Jeff, As of this writing, JPGmag.com is on the precipice of profitability...having now secured advertising from almost all major camera equipment companies as well as companies like H - P, Epson, Adobe, etc...and the core of our success? Keeping vigil to managing, organizing and directing the community ..so they can create work they vote as being the best...(and it is!)...and then we publish the magazine of their work thereafter...we've had some very serious interest from the big publishing companies to acquire our web platform that permits this kind of collaboration among a community...because, they can imagine what this is worth to their magazines if they could finally integrate the web in a meaningful way with their readership in to the magazine...in fact, to permit them to participate in creating it? The first one will have cracked the code on having this kind of meaningful relationship between print and web...and once one company "breaks through" the others will have to follow or be left far far behind.

Jeff, can you crowdsource your software development to TopCoder? I myself am trying to develop a crowdsourcing-related business -- how cool would it be to say that I crowdsourced my crowdsourcing business? In fact, I could:

- Crowdsource the design elements to 99designs.com
- Crowdsource the SW development to TopCoder (if you can)
- Crowdsource testing to Utest
- What about hosting? Can I host my web app on everyone's spare compute cycles? :)

Pretty soon the only thing I'll need is an idea, and I can just let the rest of the world take it from there. Oh wait -- I don't need to think either: globalideasbank.org.

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Thank you very much..I read your article and I am very much serious about the crowdsourcing topic. As crowdsourcing is built from open source template so there is lot of advantages of it like cost as well time saving.

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You really make it seem so easy with your presentation but I find this topic to be really something which I think I would never understand. It seems too complicated and very broad for me. I am looking forward for your next post.